Monday, 31 July 2017

(REAL) RATE MITIGATION REQUIRES SPARKING THE LARGEST LAWSUIT IN CANADIAN HISTORY.

If you were
disturbed by the Telegram Brian Jones’ “apocalyptic” editorial last week (finally, it seems, ‘mainstream’
meets blogger) which forecasts the inevitable shutdown of Muskrat Falls
because it will prove to be too expensive to operate – you will be equally frightened
by the fact that the Premier’s assertions around rate mitigation are grounded
in ideas that are just as fraudulent as those that brought us this project.

Of course,
JONES IS RIGHT.But that’s another
story.

The province has limited wiggle room to escape the apocalyptic; so it's time to listen up. The smart money should anyway.

As if to
prove he doesn’t get it, the Premier promises rate mitigation — engaging a
Committee which will include Nalcor — letting the fakers, possibly fraudsters, extend
the deceit that pervades the Muskrat Falls project.

Ball wants
us to believe that rates “can’t go above 17%”; that ‘robbing Peter to pay
Paul’ has financial merit.Even the
incarceration of Jim Learning, Marjorie Flowers and Eldred Davis — three
stellar people from Labradorwhose concern is for health and safety issues and
for the need to get to the bottom of the alleged corruption— doesn’t motivate
him to do his duty.

When a
Premier is so inured to possible malfeasance at a high level that no act of
public demonstration will motivate him to change, what is the public to do?

Are they to
tolerate his flat-footedness, Ball having calculated that not pissing off Cathy
Bennett or Danny Williams is more important than any other consideration?

Muskrat was
not the brainchild of this Premier. But he has enabled the debacle.

Anthony Rockel photo

Ball could
have shut down the project when that option made sense — two years ago, -when
the power house was barely under way. He refused, AND in failing to authorize a
Forensic Audit, he has closed the door to the ONLY real option
available for rate mitigation.

That option
is to refute the debt on Muskrat Falls altogether and to cancel the reckless
deals which Nalcor entered into with Emera.

Any person —
whether Premier, Finance Minister, Consumer Advocate or construction worker —
is delusional if they believe that there is another plausible course.

Ball wants
us to join with him in a miasma of BS, an entirely rhetorical conversation — as
if unbridled optimism alone, however unsupported or inane, is enough to find
the $400 million suggested to be the number to keep rates below 17 cents per kWh.
And remember, this is not about finding a subsidy for just one year. It will be
required every year for decades. (Of course, the $400 million figure is contrived from
a false starting point. The project cost will exceed $12.7 billion. And the
operating costs will be far higher than even Nalcor's latest ‘stab’ at a number. So, even though $400 million annually is a massive figure, when the final numbers come in, the amount of subsidy needed will be even greater.)

Ball assumes
Nalcor possesses secret sources of cash!

Hasn’t the
crown corporation already let Emera inject hundreds of millions of dollars into
the Labrador Island Link — allowing them to earn 8.8% on their money when the
Federal Loan Guarantee funding costs only around 2.4%?

Hasn’t the
PAYDAY LOAN store already been visited?

Seriously,
folks. It is time to stop listening to this Premier.

Ball is
engaging in the kind of deceit for which the Tories and Nalcor are infamous. Rate
mitigation will require direct funding from taxpayers or from reduced public
services. There is simply no magic bullet.

The real
truth — considering current tax levels, the size of the public debt and the
deficit — is that the option Ball is really talking about is to grab the money saved
from closing segments of rural Newfoundland and from shutting down schools and
hospitals throughout the province.

Ball told
the Western Star recently:

“The cost of
this project will be reflected in the [electricity] rates to Newfoundlanders
and Labradorians. My job right now is to manage those rates so we do not put
our province in an uncompetitive environment in three to four years out.”

Ball seems
unaware that the damage is done.

The funding
necessary to service $12.7 billion, pay back the capital, and operate the
project, post-commissioning, is simply too large to mitigate.

Even if the
rates are subsidized by $400 million per year, the money is not generated by any wealth
creation process. It is, as the Anonymous Engineer has described, “just a
transfer of accounts, further increasing the budget shortfall or deficit.”

Put more
bluntly, this conversation is not about making electricity rates bearable; it
is solely about increasing the dim prospect that the Liberals will survive the
next election!

What else
should the reader conclude?

I suggest
the public should know that a Forensic Audit is needed now, not just to expose
the culprits but to establish the legal basis on which the province will inform
the bondholders in New York and Canada — including the Federal Government —
that Muskrat Falls is a huge fraud to which they have been (possibly) witting
parties.

We need to
tell them that we are not paying — that they are not getting their money back!

We need to
cancel the reckless contracts which Nalcor signed with Emera — including the
one covering the Nova Scotia Block: the free power. No one should think that Emera
is an unwitting party to this mess.

As Cabot Martin wrote on this Blog in June:

Indeed,
Cabot Martin’s entire post —Deceit, Emera and Muskrat Madness, dealing with
the implications of civil fraud in the context of the Muskrat — needs to be
read by every Newfoundlander and Labradorian.

I suggest
that this is fair warning: IF WE DON’T PURSUE A CASE OF CIVIL FRAUD, WE WILL
HAVE NO CHOICE BUT TO UNDERTAKE THE CLOSURES ALREADY REFERRED TO.

Yes, the
lawsuits that will ensue will constitute the biggest litigation in Canadian
history.

But, for our
very economic survival, we have to take that approach — first, because it is
the right one; second, because it is the only one!

We should
not pay for an eternity for someone else’s unethical and quite possibly illegal
behaviour.

If we let
Premier Ball dither on the timing of a Forensic Audit, if we listen to his
blather on the mitigation of rates and on making Nalcor pay — a morally bankrupt crown
corporation, reliant on the taxpayer for its continued
survival — we will consign ourselves to penury for the next fifty years.

Admittedly,
it is a difficult approach. It will be hard for many people to contemplate —
just as putting Muskrat “on ice” seemed incomprehensible two years ago.

But the
public needs to know that repudiating illegally-obtained debt is a sensible
concept, because of the overwhelming evidence that fraud underpinned Muskrat
sanction.

I suggest
that it is time to stop thinking of how hard the idea is to grasp, and start putting your
mind around the need to survive— the need to be able to afford to ‘live’ here.

That is only one of the reasons a Forensic Audit is essential, but it is an important one. It is the first step to getting this elephant
off our collective backs.

79 comments:

We have only ourselves to blame for this mess. We elected Danny Williams, Kathy Dunderdale, Jerome Kennedy and all the other PC hacks who spent what little revenue we had from the offshore on a legacy for an egomaniac ambulance chasing tonie lawyer.

We all KNOW who did it (Anonymous at 07:15)... but it's not time for more of the blame game now (until the Audit and Inquiry are underway).

The point of the article is that this whole mess is based on lies and frauds of historical and monumental proportions and the Supreme Court of Canada will not side with Emera or Nalcor because the contracts are a fraud against the populace, I.E. unconscionable.

Also, the outcome for our citizens wouldn't be any worse if the Con's and thieves (including Emera) actually won their legal actions because we simply can't and won't pay !!

The Supreme Court is not at all likely (or empowered) to force citizens to pay for thievery for the next 40 years because a handful of jack-ass losers created a major scam against Canadian citizens. It's that simple and Des is "Smack-On" with his assessment, and with the ONLY "Way Forward".

It's time now for every one of us to wear that message on our sleeves to convince the masses into getting, and staying, firmly behind an IMMEDIATE Forensic Audit and a Public Inquiry. It needs to commence in 2017 and we need to do (whatever) it takes to bring this about.

Well said Peter. One thing, the penury will be for 57 years, not 40 thanks to some "creative" financing by Nalcor and SNC Lavalin that made the ridiculous economics of the normal 30 year amortization look more palatable.

Why does the Premier insist that the Muscrat dam must be completed? To finish the project, the Province will have to borrow billions to fulfill the commitment to Emera. There is only one solution; Shut the dam thing down now, if Emera wants it finished let them put in the four or five billion needed. The thing to remember is that the power owed to Emera is Muscrat Falls power. Nalcor’s 50 year payment plan is based on selling the power to NL Hydro. The price is calculated on the total cost of the dam plus 8% rate of return, increased by 2% each year. One solution could be to shut the project down now, and introduce a two cent a kwh tax to go towards the incurred debt. Gerry Goodman

I donn the hat of the average citizen. How are we to know who is right on muskrat, uncle gnarley and friends/bloggers or ball/NALCOR and company? They both can't be right, one is in the real world and the other is in lala land. How do I know where either one resides? And never the twain shall meet.we have to call on all citizens, ball and company, uncle narley and friends and the media to bring this to public debate, hopefully on prime viewing time. And not just a debate, but many informed discussions, and information sessions on live tv, radio, newspapers, social media and others. This is bigger than term 29, Iwa strike in the 50's and 60's, come by chance oil refinery, upper Churchill, roads for rails, the cod mortiorm, or sprung. I suggest this is bigger than all of those combined and all we have is bloggers and governments talking independently, and certainly not to each other. Is there not one brave media person that can stand above the rest and bring this right into the publics eyes. Is there not one brave mha, is there not a leader among us that can bring this into the mainstream media, the main stream John Doe. This would either force a forensic audit or prove to the public that one is not required and muskrat will be the best thing since sliced bread, and will be our saviour in the short term as well as the long term.

Ball openly musing about how the rate structure can not recover the full costs of MF is very interesting for how the accountants will treat the book value of the asset.

Accountants have a test for the "fair market value" of a asset. Presently they report the book value of MF, at the construction costs. As long as the rates will recover this, then the book value can be maintained.

If rates wont, or cant, recover the full value, then it raises the question if the book value of the asset should be adjusted, or an impairment made.

Any impairment would take away the equity on the balance sheet, and would transfer the liability from Nalcor (to be recovered in the rates) to the NL government (to be recovered by the taxpayer).

But as we are paying interest on the borrowed equity, from a cash side it wont matter at all.

So why dont Nalcor simply take an impairment on the project? This would reduce the "depreciation" line item in the rate buildup.

The question remains, how do we the people get the lawsuit started to get it to the courts. If the forensic audit is the kickstart and the Premier won't authorize it being done it's seems to be all stalled by the Government.

The facts of the economic fraud perpetrated to achieve sanction are now clear. The spur instability and Nalcor technical incompetence is now demonstrated clearly. The spur WILL FAIL! Successive governments are protecting the guilty and hiding the truth from the public. Three prisoners of conscience languish in a Victorian prison without having committed a crime.

The MF project will bankrupt the province. The consideration of stopping now and challenging the fraud in court must also take into consideration that for 57 years after completion of MF ratepayers will have to subsidize the difference value between the cost of production (60 cents KwH and rising), and the rate paid (17-21 cents in NL, 4-6 cents on the spot market). Even shutting down at commissioning would save ratepayers billions over 57 years. There is sound economic as well as technical (the spur) and moral reasons to stop the madness now.

The jailed trinity need to be supported and honoured for their courage. The best way to force an audit and free the innocent land protectors is widespread support for the imprisoned and contempt for for a judicial system that has become merely an instrument of repression of persons of conscience.

The individual who partnered with a NB-based contractor doing million$ in business with the culprits responsible for the Muskrat debacle, and who incidentally also served as chair of the Nalcor board... resigned as minister of finance today.

This particular individual was also the instigator of the vile "deficit levy", which effectively shifted the cost of the chronically inept management of the province's finances by it's dim-witted, naive and corrupt politicians... on to the backs of NL tax-payers.

Nice post. Though I'm sure on the surface she may have distanced herself from Sunny Corner Enterprises one can no doubt but assume personal gain was netted. I hope a forensic audit will be far reaching. Maybe with so much MF heat over the past 6 months things were getting too unnerving for her. Who's next?dm

The VOCM 'Question of the Day' asks about what measures you will take in the event of an electricity increase. Too bad VOCM did not inform consequences of such actions. The thing I'd like to point out here to ratepayers is that we have a fixed dollar value that must be paid back on the loan each year for 57 years. For every ratepayer who leaves the province, for every thermostat that gets turned back, for every propane stove that gets installed, rates will go even higher for the rest. And the following year when the thermostat goes another degree or 2 lower, the rates will increase to mitigate any lost revenue. For the 10% (of the current 3749 voters) who say 'they will manage'... you may want to rethink. For those who think turning back the thermostat and investing in sweaters... you may save for a short period of time only to pay more for less the following month or year.

As for me, I'm already researching relocation abroad. Between a municipal tax grab thanks to oil, current and forecasted electricity rates, and the Liberal mitigation plan (gas tax, levy, hst), it may be time to bail. If I am going to taxed like a metropolis, just as well live there with roads that won't beat up my vehicle and that can take me anywhere. Years ago, before Danny and oil, you could take a pay cut and survive nicely. Now what? Scrimp along from pay check to pay check. Once rates increase, businesses will pass those costs along to us as well. And do you think your pay will increase? Some chance. Thanks Danny, thanks Ed and all the other incompetent accomplices at the round table... you know who you are. You'll be remembered. Maybe you can all buy lots in Galway. I here the mark up is astronomical... $1600/acre which is about $400 a quarter acre lot... Retail $132,000 - $150,000. Don't expect any discounts though. But no worries, you all made your money so'll be able to afford it and the rates too I suppose.

"For every ratepayer who leaves the province, for every thermostat that gets turned back, for every propane stove that gets installed..." the dodgy culprits and inept dimwits comprising the government of the day will simply raise taxes on a fast-dwindling populace in an ill-conceived attempt to offset those losses.

Can you imagine what that's going to do to local economies, as well as the inevitable erosion of civil supports such as infra-structure and health care services?

This province won't be fit to live in just a few years from now, they'll of turned it into the toilet of Canada. That's why we're planning to re-locate to one of the Maritime provinces upon retirement.

It will be our own personal way of giving the finger to the bloody culprits responsible for the Muskrat debacle.

As to the VOCM question, what will you do when power rates rise?1. 5 percent says they can manage2. 11 percent say they will switch to another form of heat3. 16 percent say they will reduce power consumption 4. 68 percent says they will leave the province. That is from about 10,000 votes on the question.

Now 68 percent leaving , that suggests 350,000 people are going to leave.Meanwhile Ball says power rates will be capped at around 17 cents per kwh.

When this project started we were told that power rates would be about 16 cents following MF, so why the concern now. So almost 3/4 of our population is going to leave, yet only 18 people protested at the Nalcor office, and about 10 protested the jailing of the Labrador Three. Packing up and leaving is no small thing, but it suggests over 300,000 would do this. I am not planning to leave, nor do I encourage my children or grandchildren to do so. We have a few fighting Nflders, but they are mostly from Labrador, and they have good reason not to want to be a part of this province, which always puts Labrador second. On the island, almost all would rather leave than fight. At least that is what the poll shows. As a province, we let those culprits do their dirty deeds, and hardly a whimper. Surely most of those saying they will leave is pulling a bluff. and Ball knows it. Muskrat won't be stopped or made right by such bluffs. Now if just 1 percent of that 300,000 joined the Labrador Three, it would take the smile of Ball's puss, and let him know that not all are willing to Chase The Ace, nor willing to tolerate our economy, our livelihood, and way of life being destroyed......for an ego driven, useless, project built on sand and deception, and falsely promoted as least cost. The failure to stop this project is because there is just the Labrador 3 , and not the Nfld and Labrador 3000.Winston Adams

Des, refuting the debt unilaterally would have disastrous consequences. MF debt is guaranteed by the federal government. If NL were to refuse to pay, the federal government would have to assume the debt itself. Failure to do so is out of the question since it would constitute a federal debt default. Moreover, in my view at least, bond investors would perceive that as a de facto debt default by NL, which would make it very hard for the Province to raise any funds in public bond markets. In my UG blog post in December 2016 (Quebec, neither enemy of benefactor) I made two recommendations. First, although a forensic audit is important at some point the most pressing question relates to the cost of continuing relative to the ultimate benefit. That depends among other things, on the expected cost of stabilizing the North Spur. Moreover, it is especially important to remember that the decision to continue may not ultimately be up to NL. Indeed, depending on how quickly project costs rise, finding additional financing may ultimately be impossible. Second I suggested that this project clearly exceeds NL’s capacity to pay, although the NL government doesn’t seem to agree. If NL were to arrive at that conclusion, it would be incumbent on the Federal Government to assume the debt they guaranteed. However, it would be in the interest of all involved to arrive at a negotiated solution. In my humble opinion, the consequences of unilateral debt repudiation by NL could be quite serious. Don’t get me wrong, it is the ultimate threat, but some kind of negotiated solution is in the interest of all of us. Of course this is a moot point as long as NL keeps pretending that all is well.

On mr. Lahey's two main points: 1) we may not be able to fund muskrat to completion. I have been asking that question several times on this blog, with no response. At least the writer gives his opinion. Does that mean the project will shut down, probably not, it may mean emera etc. may want to provide funding for completion....but at what cost to us. They will do us no favours. They will want their return plus interest. They will get it from us as rate payers, and as taxpayers. They will not get it from muskrat because the return is so low, but they will get it from NALCOR. NALCOR controls revenue from oil, and minerals, so our oil money and mineral money will go to emera, and any other company that funds completion. Not a good situation to say the least. For this reason should NALCOR be dismantled? Point 2) when the govt accepts it's inability to pay the loan guarantee, and the Feds. Have to start paying, it is better to have a negotiated solution as opposed to a unilateral decision with the Feds. Not sure all agree on that. But if negotiated the terms are basically spelt out in the agreement of the loan guarantee. And since Harper negioated or laid down the terms to which Cathy agreed to, in desperation to get the loan, they do not favour us. We are basically in the poor house before the Feds are required to take over the loans. So which ever way you look at it we are over a barrow, without a wing or a prey. And ball is in a zombie mode and sleep walking to a very steep cliff. And history will lay the total blame for the demise of this province on ball and not the real actors. Of Danny, Eddie, Cathy and the cabinets and all the mha's of that time. Can any of them look in the mirror without throwing up, including guys that still want to hang around, Steve, Paul d. Etc.

The point I have been trying to make is that this project never could have proceeded without a federal loan guarantee. A loan guarantee should require due diligence in the evaluation of the viability of the project. The feds were negligent since this project was based on deceit and falsehood. It seems to me that degree of negligence should at the very least justify attempts to renegotiate the terms of the guarantee. Meanwhile, unilateral debt repudiation remains a legitimate threat. But, my view from afar is that very few people outside of your little UG circle are aware of the extent of the problems facing MF and the NL Government still seems to remain officially optimistic.

The terms of the agreement between the two governments is readily available, and from memory they do not favor us in any way, we have to be on skid row before the Feds start paying.... Don't for get the terms of the agreement were drawn up with Harper in the drivers seat.

58% said no to an alliance with PQ on hydro in the recent VOCM straw poll. We should and must wait for the SCOC ruling on the upper CF takeaway contract. We should not get too optimistic with 3 judges from PQ on that bench. They may refuse to see the treachery in the original negotiation or in the timing and true intent of the more recent GWAC agreement. There are none so blind as those who will not see. We will have to wait and see.

So if the SCOC disagrees with NL it is because of the lack of integrity of the Quebec SC judges. Also, only 58% refused to have anything to do with Quebec? How do NL’ers feel about Nova Scotia?“The 1969 Power agreement is succinct, simple to follow, clear in its expectations of both parties, and enforceable” (UG, March 6 2017). You may not agree but it is easy to understand. Meanwhile the agreement with Emera is a legal quagmire - 26 separate legal agreements totalling some 5000 pages of legalese. The Emera deal was sold to NL ratepayers as 20% of the cost for 20% of the power. However, there is no risk-sharing at all. Emera is entitled to receive 20 % of total MF production capacity (which can be significantly greater than 20% of actual production) for paying the fixed cost of the Maritime Link (ML). Emera also receives an additional option on 40% of production at existing market prices. In exchange, Emera transfers ML assets to NL after 35 years. Unfortunately, you have to wonder about the future value of that asset since the estimated life span of a submarine cable is somewhere between 30 and 40 years. Meanwhile, Emera’s ownership of the Labrador Island Link (LIL) appears to have risen from 29% to 59% (UG, March 6 2017), presumably because of equity injections required by the federal loan guarantee. This investment will earn Emera an 8.8% return, financed by the NL ratepayer. Emera will earn almost as much on the LIL as Newfoundland Power will earn on its entire transmission network (UG, March 6 2017).Some people may concede that Quebec did provide some minor services in exchange for their ill-gotten gains – like assuming all financial and operational risks on what was, at the time, the largest hydro-electric project in the world. Like assuming all costs related to ensuring the project was completed on time and on budget. Quebec subsidized close to one third of the total interest cost and assumed significant foreign exchange risk. HQ alone assumed the substantial cost and risk of transmitting the power over 1,000 kilometers of tundra using unproven technology. Having already ceded its water rights for 200 years, NL’s share of the project was limited to a 9% equity share of CFL co. Only later, after project completion did NL take a large share in the project. To Quebec, the profit on the project is the cost difference between CF and alternative projects that could have been realized at the same time within Quebec. NL prefers to calculate the profit based on the difference between what HQ pays and prevailing market electricity rates while ignoring, among other things, the cost of transmitting the electricity some 1,000 kilometers. Implicitly, NL seems to assume that HQ would have performed those services and assumed those costs and risks for the privilege of completing a project in another Province that would have ultimately cost many times more than any one of a number of projects that could have been completed within Quebec at the time.In any event, one of the stated goals of the MF project was to avoid the evil Quebecers altogether. Indeed, one of the most popular promises of Williams was to ensure the cancellation of the 2002 deal with Quebec negotiated by Grimes which, I might add, would have provided NL with a risk-free annuity in exchange for the development of the Lower Churchill. In 2005, a joint Ontario-Quebec venture for the development of the lower Churchill was also rejected with little or no thoughtful consideration. That was a particularly unfortunate decision because it would have encouraged more interprovincial integration in electricity transmission. NL wanted to proceed on its own which is its right of course. However, I am left wondering what invaluable services have Emera provided to justify the current deal. The MF deal with Emera looks to me like an obscure, opaque, one-sided agreement, no? What is in this deal for the people of NL? I must be missing something?

The deal with Nova Scotia and emera makes absolutely no scene and is getting worst all the time. Muskrat was a total lie by the politicians and later Emera on the people of the province. Right from the beginning, we didn't need the power, next it was not the least cost option. And from there the lies and half truths just snowballed as spread by NALCOR and their owners the government. It was driven by ego, the need to get one up on Quebec. And muskrat could never turn a profit. But they were so desperate to get a deal with emera , ns and they Feds they signed their souls and that of all nlers away, without a second thought, and still willing to do it. They told Harper to send the agreement for the loan and blindly signed it, the pub was excluded, and emera was given a free hand and NALCOR ran the show, more powerful that the nl government. NALCOR was given a free hand to do what they wanted, and not much has changed as ball just wan't to get her done boys, so it's been dam the torpedoes from the beginning, full speed ahead, as if there was no end to our ability to pay. So now the chickens are coming home to roost, and there is no escape. That 's it in a nutshell.

What is past, we must accept and move our efforts forward. That a negotiated settlement with Quebec over joint administration of natural resources which straddle the contentious border, is long overdue. Put the egos and anger aside. This we owe to future generations within the confederation. Just like the renegotiation of NAFTA, let's all approach a negotiation with Quebec with optimism, devoid of acrimony, pettiness, and negativism.

Seeing as you are a legal expert, why do you think the SCC (not bad huh) decided to hear the latest challenge? Here in Quebec the courts judge whether or not the terms of the original agreement are respected or not. The CF contract is a very simple document and clearly the conditions set out in the agreement have been respected. Are there other considerations in English Common law that Quebecers just don't understand?

agreed, there are no easy solutions. The feds will no doubt have to see a lot of hardship before assuming MF debt. I guess my main point was that debt repudiation also has serious consequences. First, the Feds would have to assume the debt in place of NL and second, NL's ability to finance in public bond markets would be seriously impaired.

So, what better outcome can we hope for than, an asset transfer of Muskrat to HQ. Thereby, all technical issues get re-engineered, Surplus power is interconnected to existing HQ transmission, NL gets as much Churchill power as it can justify it needs, QU gets control of the 5 rivers sliced by the dumb Privy Council Southern Boundary, poof! the debt disappears off NALCOR books, ratepayers get "blended cost benefits". Politicians who perpetrated the rotten deals go free.

I dont know what the solution is. I do think the feds were negligent in this case by allowing this project to proceed without sufficient due diligence. Surely that should justify some financial relief in the form of renegotiation of the conditions of the loan guarantee. However, I find it hard to imagine any cooperation between Quebec and NL.

Easy... Why the Feds were negligent in allowing it to go ahead without due diligence, was Harper, he was no friend of Danny or nl, so he saw the opportunity to screw us royally and just wrote the conditions that Cathy signed...he is still laughing, or should I say a wry smile in harpers case...and we were so dumb....

Henny Penny go tell Mr. Rabbit the sky is falling. I don't think the end is as near as some of you folks do. It is a problem created by politicians and being prolonged by other politicians. It must be solved no doubt but we have been on the doorstep of failure before and survived. Hell we have survived the upper CF take/giveaway so far haven't we? What is it a billion a year?

The sky is not falling but our moral and quality of life will be. And for generations. We survived the UC because it wasn't funded on our backs by incompetence or fraudulence, or both.

When power rates raise 50% over current (minimally) it's going to affect the majority already trying to survive a harsh economical landscape. And don't kid yourself, that landscape is not just in NL... Canadian household debt is at a record high. People will need an extra couple of grand to heat homes and cook supper, not to mention pay the increases that every business will pass along to us as well. The hardships being cast by this project on an already struggling populace, many of whom are aging with fixed incomes, will be devastating for many. The sky is not falling and the end is not near but our government and media are doing anything but to make people aware of the consequences this project will have. You are right about 'created by politicians and prolonged by politicians'. Hopefully they will be the ones falling. One by one. I think it started yesterday.dm

Mr. Penny, or...whoever...you never miss what you never had...and the sky is not falling mr. Rabbit...that will all survive...but we reap what we sow... And as I have said before we went from rags to riches to rags again now... All through our own doings, so why not take a few years in the sun instead of gambling it all....eternal optimust he called himself. Our children and grand children will not have their day in the sun because or ego and stupidity. And I am not endorsing the upper Churchill situation, but on that one we got shafted, on muskrat we shafted ourselves, which is worst, we should have learned from our mistake. So self inflicted. True we have survived through 400 years, and we were given a chance and blew it. We didn't put any money in the upper, in this one we are in to the tune of 15 billion maybe, who will pay that back....or will Peter rabbit, just say, not , nor me ..no me to the other rabbits.

You forget that the Upper Churchill never cost us 1 cent. We still get revenue (albeit small compared to what HQ gets but it was Quebec who put up the cash) We have no one to blame here but ourselves as we had no money then (and we have even less now). We'll get recall power in 2041 if it isn't given away by those running the current fiasco.

Most of the money to build CF came from the bond markets on Wall Street. We the people of NL paid for the approximate 2/3 we own of CF (bought from Brinco circa 1974) and the people of Quebec paid the approximate 1/3 that HQ owns. The same HQ, the CF customer, has profited because of windfall circumstance , from the purchase/sale of CF power and has profited substantially more than the 100% owner of the water resource, we the people of NL. That is the crux of this long standing dispute between NL and HQ.

For what it is worth, you are only telling half the story. First, you are quite correct in saying that the project was financed through bond issues, most of which were denominated in American dollars. You are also correct to point out that (most) of the interest cost was financed through the revenues of CFL co, which was, after nationalization, equivalent to 2/3 payment by NL. However, the bonds were guaranteed and interest cost was subsidized by Quebec. Quebec also guranteed the exchange rate on the US dollar debt. As for ownership of the water, NL ceded its water rights to Brinco for a period of 200 years and Brinco signed an agreement with HQ until 2041. Beyond that, my understanding is that the water rights will remain in the hands of CFL co for another 130 some odd years and HQ will remain a one third owner of that company and those water rights.

As for wind-fall gains well, something unexpected is pretty likely to happen over 70 years. The argument seems to be that a fixed price deal would have been fine as long as prices dont change much. To me that is a bit like an insurance policy that doesnt pay out if the claim is large. In any event, those are the kinds of issues that should be negotiated before signature - not afterward. Finally, sadly enough, the deal with Emera

Hear the words of no less than former prime minister of Canada, Brian Mulrooney, in 1981, "The present contract between Quebec and Newfoundland for electric power from Churchill Falls does not reflect in any way the new economic and energy realities that have developed since the OPEC crisis, The inequality and absence of fair play in the contract in question is obvious. Simple decency and the most elementary spirit of justice demand its immediate renegotiation"We are still waiting for the simple decency and the justice. The question is, can the Supreme Court of Canada deliver such justice finally in 2017/18?

Agree great words from another politician, where did he utter those words in Ottawa, Quebec City or St. John's, but more importantly as pm what did he do about it. Just hot air or in a campaign to get elected again. But I have nothing against Brian, as good or better than most politicians. Justice in the courts is about the law of the land and not necessarily fair play.

Let's say I sold you my house many years ago. If you liked the stucco ceilings and wood paneling of my late-70s décor when you bought the house, you can’t re-open the contract because it’s the 90s now and those things are out of fashion.

When the contract was negotiated, no one knew what would happen with electricity rates.If they went up, Hydro Quebec would profit. If they went down, Hydro Quebec would be on the hook to buy all that electricity no matter what.

Hydro Quebec and BRINCO took the risk and PURPOSELY/knowingly signed a fixed rate contract.

When the price of oil shot through the ceiling in the 1970s (adjusted for inflation, it was still higher then than now), prices went up. While it’s unfair in reality, that doesn’t make it unfair as a matter of law.

Otherwise, if courts were constantly overturning contracts, no one would make them. There would be no point, since they’d constantly be open to change.

Bernard, the infamous upper CF contract and its GWAC and shareholders agreement expire in 2041, is it August 31st of that year? I may not be around to see it but I suspect that CFLco will be wound up one way or another then unless a very favorable deal for NL can be struck for its continuance. Any water rights Brinco had as a result of its shareholding in CFLco reverted to NL control in 1973/74 and will survive the upper CF contract.

In the document, NL seems to indicate that the water rights to the upper churchill belong to CFLco, which is owned partially by HQ. The document includes a fairly detailed discussion of what happens in 2041. Just sayin.

In reusing your wording (shafted), you should rather say NL self-shafted itself by having given away the WHOLE Churchill river water rights to BRINCO (not HQ).

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Everyone would have been better off if HQ had devellopped James Bay earlier instead of UC.

James Bay would have ended up way cheaper (by totally avoiding the steep inflation years of late 70s/early 80s). James Bay would have ended up the same bargain hydro facility that UC currently is.

HQ would have avoided all those useless court cases. Would have avoided all that hatred/bashing (And all that for a facility HQ will lose after 2041 - quite pathetic)

I just wish that 1969 contract was never signed. Those 3 X 735 kv lines over 1200 miles not built. And have all that money spent on James Bay instead. (HQ could have devellopped Grande Baleine at the same taken - before the growing Cree opposition)

DW could have used HQ (or anyone else) for the financing, design, construction and operation of MF. As in UC, that's called a turn key contract. No risks for Nfld. You just pay for the electricity you get. Period.

I just don't understand why Nfld did not go that route.

But hey, DW did not want any of that (or the previous Ont/Qc Gull Island proposal) and would rather bankrupt the province with the current project + that "anglo saxon" route...

I know NL could have gotten itself shafted yet again by HQ. I guess we rather be shafted by someone else this time. Doesn't change the fact that upper CF was the first mega project for HQ involvement but then they did go on to tackle the Bay James projects using some of the same characters who built CF. Good for HQ.

Why are we always so certain that we will again be shafted by pq or someone else, are we suffering from a superior or inferior complex, or something else. Sure I agree we got shafted on the uc deal, and we shafted ourselves on this one, muskrat, but are we not capable of standing up for ourselves and doing the deal right. Maybe we are too political and blinded by our politics and willing to sink or swim for the party rather than the province.

You do realise HQ had built Bersimis and the Manic-Outarde complex (incl. Manic 5) before UC right? At the time HQ was already competent in managing mega projects + transmission lines in quasi sub-artic condition. On time, functional and on budget, despite the novelty of 735kv lines and the northern harsh conditions.

I can only say my experience of two summers working as a engineer in training at Churchill falls was a fine experience; 1. earned money that helped pay my university expenses at MUN2. learned from experienced engineers , from Quebec and California3. good work conditions and good relationships with other Nfld and Quebec workers4. First saw some guys smoke hash and use the F word and a few French swear works, ..........educational and entertaining........along with Harry Hibbs music at times5. Developed some understanding of building dams and dykes and quality control was important6. Disappointed not seeing a single Innu in the area, not knowing the Nfld Plan was to get these people off the land that was to be flooded, without compensation7. Went on to become an electrical engineer who designed and commission Nfld grid 230 kv system in the 1970s8. Had a background that allowed me to become a naysayers as to Muskrat, on high cost, small power output, and difficult technical issues.9. Never developed the anti-Quebec feeling that is too common in Nfld promoted by politicians, that led to this fiasco.10. While Ball says they are not talking to Quebec on hydro issue.........seems this blog is the only place some talk is taking place. Hey...even Cuba and the USA is making amends, unless Trump, the idiot stops it. And we are fellow Canadians, with much in common. Good will can go a long ways, once you meet a person half way, and with respect. Pity this rift continues before the courts........15 billion to spite, anti Quebec......anglo-saxon route .......a very hard lesson. Some good benefit was nearly in range for 2041........and this stupidity........depressing and sad, is it not. Back to have not status and seeking handouts from Ottawa for hospitals, roads and other essentials as in the past . No dignity nor pride in that. Maybe we are headed as the people in Greece, pensions cut in half, unemployment rate 22 percent, debt that can never get repaid.And Nalcor, Nfld Hydro and our government still deceive us, daily. A lawsuit........why did Greece not try that......so I am not hopeful that is a solution....... Chicago economists have written that Nfld would have been better off to declare bankruptcy in the 1930s than the dole days of Commission govn.........., as decided by the British. So, no easy answer, that I can see.Winston Adams

Robert, the piece on NS wind says their grid has no more capacity for wind beyond the present proposal by Emera to USA, the 1000MW line via NB and underwater link. That is to be 700 MW of wind and 300 MW of hydro from Nfld and Lab. So basically without wind storage, wind has to be anchored with hydro turbines for stability of the grid. So this says no room for Beothic to transmit through NS grid. Also......see my previous remarks about Beothic and Kirby Mercer........pie in the sky operators, in my opinion. Also, by NS using our hydro (300MW ) to anchor their wind generation, it prevents any substantial wind generation on the island for our grid. Not only to we give away Hydro power to NS, we gave away our ability to generate much wind for our island use. Notice NS says more power ties with HQ is needed......because this power tie would anchors more wind capacity for NS........ But HQ is making their own bid to Boston to compete, and it included hydro and wind.........so they use their own hydro to anchor wind..........smart thing to do........and another example of how Nalcor has been taken in by NS allowing then to develop wind instead of Nfld. Nalcor and our govn.....dumb an dumber.As for HQ, I say if you can`t beat them,(which we can`t, as they are world class in hydro development) join them. We just need a fair deal, ........perhaps the deal can be made on this blog!!!!Send Dave Vardy, Cabot Martin and Des to work out the terms. Lock up Wade Locke, and go light on James Feehan, just house arrest.Winston Adams

Yes, this all suggests that with changing technology, HQ will be the main power supplier to New England and Atlantic Canada. The negotiations referred to previously, is the only and best resolution to the mess that NALCOR have created, with political misdirection.1. Remove the stranded debt Muskrat project from NL balance sheet, move it to HQ/Fortis/Emera.2. Access whatever hydro power NL needs to stabilize, (Island hydro, Lab Link, etc.), its own move down the road to renewables, wind, solar, geothermal.3. Apply similar solutions with respect to the Atlantic Grid, to achieve best basket of renewables, (Wind, solar, geothermal, tidal), stabilized with HQ hydro.

Power rates across Atlantic Canada including NL should be harmonized for the common benefit of the struggling economies always prevalent. Reduce bureaucracies, single province, single and public power grid operator, multiple and competitive public/private power generation units.

Winston the NS claim that we have no more wind capacity is bullshit. It is a convenient excuse to keep our filthy, unscrubbed coal plants going for decades. We have gas turbines handling the spinning reserve.

In addition we are now in the age where cost competitive battery storage can balance the load in real time. This means that renewables become unlimited and the gas turbines can be eliminated and not kept idling.

As you both pointed out, Emera expects to stabilise its intermittent wind power (70%) by combining it with MF hydro (30%).

I just find Emera too optimistic when it expects to stabilise anything with only 30% of hydro (from MF).

Furthermore, with no meaningfull reservoir, how can we expect MF to achieve efficient stabilisation in a timely manner? What about the summer production, when the Smallwood reservoir is being refilled and UC not really producing anything that could be turbined later at MF?

Bruno, wind capacity is almost unlimited, but is limited as a proportion of the grid total, for stability of the system. Wind storage will allow more wind, where this is economic. Some isolated island grids use 30 percent wind. Scotland may be 40 percent wind, but is tied to the English grid that allow them stability. Nova Scotia now has about 200Mw , about 10 percent of peak load, so if they add 700, would be about 30 percent , so pushing the limit unless storage, I guess coal is cheaper than storage, or they want to get max life from their exists coal units.Nfld with 54 MW of wind is about 3 percent of our peak load, If 30 percent, it suggests 470MW more wind, and 43 percent capacity , effectively 200MW average. Holyrood uses about 350MW winter average. Reduction in load from customer efficiency offered Nfld some 600 MW reduction potential. Some 80 MW of cost effective island hydro had been identified . Our Island isolated options were1. 600MW reduction via customer efficiency (was not considered by Nalcor)2. 470 MW of wind at 43 percent capcaity = 200Mw (Nalcor deliberated underestimated wind )3. 80 mw or more of island hydro (Nalcor did consider this)In all, almost 900 MW of the above was available and a combination was best. Compare to 550 avg from MF and 300 from UC. As to cost, a combination of the above noted would be least cost by more than 10 billion, and energy bills would have stayed stable, about 10 or 11 cents. I think an energy consultant would arrive at a similar analysis.Winston Adams

Winston,Wind and other renewables are now unlimited with cost competitive battery storage. See Musk's deal with Australia last month. The grid may need upgrades to handle larger 2 way loads in some areas.

The results in either scenario is at least an order of magnitude cheaper than Danny's Dreadful Disaster. The efficiency that you promote is low hanging fruit that should be subsidized by Nalcor but of course they promote wasteful consumption to mop up their poor planning.

Nova Scotia has so far reduced demand about 150MW by incentives fro customer efficiency, now doing about 40 MW reduction a year, aiming for about 500 MW reduction. Their coast averages about 3 cents per kwh reduction. Compare that to 60 cents and rising for MF generation delivered. With about 600MW potential for Nfld, that is a lot of low hanging fruit, some lower than others, Not sure how that ranks with the cost of wind storage....but MF is surely crazy, and alternatives ignored.Winston

A little Compensation came with the New Dawn agreement , over 40 years later, part of MF plan, some 2 million a year, not sure of the amount, conditional they take no legal action on the Upper Churchill project, and go along with the flooding for MF. So, tell me, what did Nfld and Joey do to compensate the Innu in the 1960s, and as the area flooded was their traditional hunting grounds , what was the plan for flooding, leave them there to drown or have then removed by whatever means? Winston Adams

The Nfld government wasn't out to "get the Innu off the land" that was flooded for Churchill Falls, because they were barely there to begin with. Presence was only ever seasonal and nomadic, and by late 1960s the Innu had already largely "settled" in Sheshatshiu and Davis Inlet. Even without the hydro project, you could have plonked yourself on the shores of Michikamau for years without ever seeing another human, Innu or otherwise.

This idea of the Innu being "forced off the land" comes from a cowboy movie someone saw.

That's not to say they weren't treated shabbily, and don't deserve redress. But that left-wing writer's imaginary Innu history from the 1980s is best left behind.

The new BC government has just announced a stop/go analysis of Site C, which will be conducted by the BC PUB. This is what should the Liberal Government should have done immediately after they were elected. Instead they decided to carry on the course set by their predecessors. We are still waiting for the final report of EY. All the public got was an interim report which told us that the cost estimates and the project schedule were not realistic.David Vardy

David, Is the EY final report in limbo like the SNC 2013 risk analysis? We now have creditable science warning the spur will fail. This is more evidence of risk to both human health and the asset. The hazard is greater than for site C yet no DEMANDS emanate from the comfortable and well connected to stop now and do a public inquiry and audit. Weak resistance in the face of fraud and corruption is inadequate. It is time to stand up and be counted like the Labrador Three have.

Creditable science but not necessarily credible science! What you need to focus on is credible engineering. That is where success or failure lies in the case of the North Spur. Do they have the right remedial measures in place, that is the only important question? The problem can and must be solved.

There has been ample evidence on this blog that the wrong engineering analysis was undertaken by Nalcor. Let me remind you that they have not made the engineering studies public, have not justified their methodology and have not released the drill logs.

The recent MA thesis outlines the methodology that is state of the art and was overseen by a leader in the field and of the methodology. Your creditable vs credible hair splitting is not informed by the facts.

About Des Sullivan

Uncle Gnarley is written by Des Sullivan, of St. John's.
He is a businessman engaged in real estate, retail and development companies.
A Director of Sullivan Capital Corporation, he is a former Executive Assistant to Premier's Frank D. Moores (1975-1979)and Brian Peckford (1979-1985).
He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB).
Uncle Gnarley permitted the use of his highly regarded name provided he could have full access to state his own rather unequivocable opinions. (A more detailed Profile of Uncle Gnarley is described in the very first Post entitled "Uncle Gnarley is alive and well" found on this site.
Sullivan is a firm advocate of sound fiscal management by the provincial government and intends to use this Site as a forum for commentary on the major issues of the day. Says Sullivan, "Newfoundland and Labrador inspires debate on a variety of issues, a veritable Muskrat Falls of opinion".
Readers are invited to leave their opinions, too.
Uncle Gnarley will post every Monday, and more often as events warrant.